AgdaPkt 2015-12-07 Closed and Joint SA and PFA

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6.3.A. - Page 2 ANALYSIS Given the improving economic conditions and an increasingly competitive labor market seen in recent years, the City has worked with labor groups to implement appropriate cost-of-living increases in order to maintain a compensation program that is both fiscally sustainable, and that would ensure the City's ability to attract and retain highly qualified employees. For employees other than executives, the City negotiated salary increases to offset the impact of increased pension contributions. In order to address executive compensation in the same manner, the City Manager and Human Resources staff examined executive compensation in relation to labor market studies, and in comparison to subordinate employee groups. An analysis of Executive Management compensation changes revealed that the increased pension contributions, when combined with salary increases, yielded on average a net salary reduction of five percent (-5%) over the course of four years. Furthermore, employee contributions to pensions will increase to sixteen percent (16%) of salary as of January 2016. In recognition of the increased cost of living as well as increased employee contributions to pension costs, the City Manager proposes a seven and one half percent (7.5%) increase to salary ranges in the executive management salary plan effective July 1, 2015. This increase would apply to all employees in the Executive Management Group. Combined with the increased contributions to pension scheduled for this year, the proposed cost-of-living adjustment represents a net wage increase of three percent (3%). Additional compaction adjustments for six classifications are recommended to ensure that the ranges for these classifications maintain a differential of ten percent (10%) above subordinate classifications, as is provided for in the Executive Management Summary of Benefits. These adjustments range from one and one half percent (1.5%) to eight and one half percent (8.5%). Compaction adjustments to salary ranges apply to the range only; individual salary increases within those ranges are set by the City Manager on the basis of performance. It is recommended that benefits as outlined in the Executive Management Summary of Benefits, including pension contributions, shall continue for the current fiscal year. However, amendments are recommended to clarify cost-sharing obligations for new employees hired after the Public Employees Pension Reform Act (PEPRA), as such employees receive a significantly smaller pension benefit at a lower cost to the City. In addition to required contributions set annually by CaIPERS based on the cost of the benefit, PEPRA employees shall pay two percent (2%) of salary towards the City's share of pension costs. Additional minor updates are included to maintain consistency with current City policy and legislative changes, and to incorporate separate resolutions previously approved by Council concerning benefit changes. ALTERNATIVES • Direct staff to propose alternative compensation adjustments for Executive Management positions. • Direct staff to propose alternative amendments to the Executive Management Summary of Benefits.